Incitec Pivot’s fertiliser price likely too high for some

Previously suitors weren’t keen on Incitec Pivot’s manufacturing business but preferred the distribution side.

Potential bidders have been given information about Incitec Pivot’s fertiliser unit, but the jury’s still out as to how much they will be prepared to pay.

After information memorandums were sent out about two weeks ago, prospective suitors have had an opportunity to assess what is on offer this time around.

The general view is that the Australian-listed company has price aspirations of about $1.2bn.

That may be too much for some, and some sources say it’s not too different to the price last time it was on offer.

Last time, suitors were not keen to buy the manufacturing part of the Incitec Pivot fertilisers business, but were keen on distribution. This time, there’s the chance to buy the distribution unit – where all the value is considered to be – separately.

In its results delivered late last year, Incitec Pivot wiped $941m off the value of the fertiliser unit.

The writedown included $100m for its US operations.

Most of the rest was linked to the Australian manufacturing operations.

This leaves the company to deal with problems at its Phosphate Hill operations, where it has faced gas supply disruptions and a shortfall in sulfuric acid from Mt Isa, slashing its earnings.

Jarden is working on the sale, which comes soon after Mauro Neves de Moraes took over as CEO of Incitec Pivot . UBS and Macquarie Capital have previously made efforts to sell the fertiliser business and Macquarie still has a role.

Incitec Pivot is looking to focus on its more successful commercial explosives operation, Dyno Nobel, which had some hoping it may slash the price.

Australian-listed trade buyers like Elders and Ridleys and global strategics like The Mosaic Group, CF Industries and Nutrien, which has a major Australian presence, will be going head to head with private equity firms such as Pacific Equity Partners and BGH Capital, which have been sounded out by investment bankers in recent months.

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